GE Transportation reaches agreement to merge with Wabtec

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GE plans to split-off the company after it closes the deal, essentially giving Wabtec shareholders ownership, with 49.9 percent of the new company.

The deal, first reported by Reuters on Sunday, is the biggest to be inked thus far by GE Chief Executive John Flannery since he announced a major overhaul of the USA industrial conglomerate late a year ago.

Garage Sale       GE is still too sprawling and diverse even after years of streamlining              Source Bloomberg
Garage Sale GE is still too sprawling and diverse even after years of streamlining Source Bloomberg

Flannery told GE's annual shareholder meeting last month that the company is "keenly aware of the pain" caused by its poor performance and dividend cut previous year.

The company's transportation business, which a year ago had $4.7 billion in revenue, manufactures passenger and freight trains, mining equipment and marine diesel engines, amongst others.

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JPMorgan Chase & Co. analyst Steve Tusa pointed out earlier this month that GE's transportation and lighting businesses had a combined $175 million sitting at GE Capital Services, suggesting we may see a similar dynamic when the final details are spelled out in regulatory filings. "It also is one of our most cost-competitive sites and the team has demonstrated the ability to efficiently take on additional work". The transaction is expected to be tax free to the companies´ respective shareholders. (BHGE). GE has a majority stake in Baker Hughes.

On news of the deal, GE stock rose 2.8% to $15.39 in trading Monday. GE was among Monday's top performers on the Dow Jones industrial average.

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As part of the restructuring plan announced late previous year, GE is aiming to divest at least $20 billion of assets through sales, spin-offs or other means. He expects conditions to improve over the next two years as the industry comes off a trough in demand in 2017.

Wabtec chief executive Raymond T. Betler will remain president and CEO of the merged company while its Chairman, Albert J. Neupaver has been re-appointed executive chairman. The firm owned 11,217 shares of the transportation company's stock after selling 898 shares during the period. After the merger is completed, GE Transportation President and CEO Rafael Santana will become president and CEO of Wabtec's freight segment, while Wabtec Chief Operating Officer Stephane Rambaud-Measson will become president and CEO of Wabtec's transit segment.

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"Together, we can expand our global reach, strengthen our market capabilities and lead digital innovation across the transportation industry", said Santana.